The Current Market Sentiment‏

The single currency managed to retreat again versus the greenback after failing to get over 1.356 to be traded again currently near 1.35 again undermined by new dovish comments from the ECB member Coeure indicating that the ECB can take further easing steps in the case of facing steeper falling of the prices.

Coeure has tried to do also what has been done from other ECB members as he has tried to avoid talking about the deflation pressure saying that the recent cut by the ECB was to maintain the inflation well above zero yearly naming the prices down side pressure which have been watched in EU recently only a slow disinflation stance.

While the looming deflation risk has become the main reason of selling the single currency since the falling of EU HICP flash reading of October to the lowest level in the last 4 years even before the interest rate cut itself, as further EURO appreciation cannot be unwelcomed by the ECB in the way of fighting prices downside risks in EU while the exporting activity can be in the need of stimulation for supporting growth of its industrial countries.

While the Aussie dollar is still looking depressed by talking about its over-valued exchange rates from RBA chief Glenn who tried to inform the market that the intervention is not off the table and it can be done, if it is needed and also the IMF which guess that it is 10% over its fair value.

While the pressure has been already on the Aussie since the Australian Treasurer Joe Hockey’s decision to offer $8.8 billion to expend its ability to execute foreign exchange operations in a better flexible way can also help it to intervene easily in the forex market to trim the Aussie dollar appreciation when it sees that it should do.

From another side, The Aussie dollar has come under pressure last week by the lower than expected preliminary figure of Nov HSBC Manufacturing PMI of China which came down to 50.4 while the market was waiting for 50.9 like October. That’s beside the worries about the Chinese financial Market which come to the surface more than one time this year to drive the bonds yields in the Chinese money market weighing down on the growth outlook of this leading economy which depends on the close Australian commodities market to it.

While the growing prospects of having tapering decision by the Fed in the next few months by God’s will are still underpinning the greenback generally specially following the minutes release of the recent Fed’s meeting by the end of last month which has shown also stronger appreciation of what have been accomplished by the Fed’s QE policy referring to the labor market recovery too to maintain the option of tapering in the next months again after Janet Yellen could reduce it by indicating that the recent achievements of the US economy are not enough to take a decision of tapering soon while there is no bubble threat in the assets markets or inflation pressure yet to drive the Fed to do.

God Willing, AUDUSD which is existing below its 200 several moving averages starting from 15m currently can meet now in the case of falling further its previous supporting level at 0.9114 which could hold during the Asian session today while getting below it can be faced another supporting level at 0.9036 before the psychological level at 0.9 which can be followed by 0.8961 before its higher low at 0.8891 which came after its formed bottom at 0.8846 on the 5th of last August which has been reached on increasing speculations of having lower interest rate by RBA while going back up can be faced by intermediate resistances have been initiated during its recent falling from 0.9445 at 0.9187, 0.925, 0.9308, 0.9405 before 0.9445 again which can be followed by 0.9481 by the psychological level at 0.95 which can be followed by another resistance at 0.9542 before its 0.9622 resisting level which has been formed just below its 200 hours moving average while surpassing it too can be followed by 0.9669 before its recent formed main peak at 0.9756 which has been reached on unexpected rising of CPI in Australia by 1.2% q/q in the third quarter while the market was waiting for 0.8% from 0.4% in the second quarter to increase the probability of having foreseeable end of the current RBA easing cycle which has started in the beginning of November 2011 to drive the overnight cash rate to 2.5% currently from 4.75%.